External pressure remains high (Russia Fixed Income Weekly)

Russian Eurobonds ended the week lower on unfavourable external conditions. Domestic debt was flat and fairly inactive.
The spreads of Russian Eurobonds continued to widen during the first half of last week on remaining risk aversion trends on the global markets. On Tuesday, the spread of the benchmark Russia 2030 issue reached 121 bp, a figure not seen since July 2006. Later during the week, the spreads returned to their original values but this coincided with a correction in US Treasuries, triggered by the publication of strong US macro data. Thus, the prices of Russian sovereign bonds did not have the opportunity to take advantage of the spread tightening. Overall, the Russia 2030 Eurobond lost 0.28%, with its spread widening by 1 bp to 112.
Thanks to their higher spreads, corporate Eurobonds were less affected by the global volatility and nearly all major issues ended the week higher. The Deutsche UFG CEB Index added 0.25%, with its spread down by 7 bp to 180. The strongest gains were seen in the Telecoms (+0.39%) and Gas (+0.38%) sectors.
Domestic debt was little changed on relatively slow trading during the short week. Both the RGBI and RCBI indices ended the week unchanged, at 116.5 and 100.7, respectively. Liquidity remained suppressed as market players are still accumulating cash in order to pay for their bids at Sberbank’s SPO. Overnight interbank rates remained above 4%.
On the primary market, a total of Rb 15 bn worth of new corporate bonds were sold last week. This included Rb 3 bn of three-year Bank Vozrozhdenie bonds, sold at a yield of 9.15%, and the same volume of five-year bonds from Uralelectromed, puttable in three years and placed at a yield of 8.42%. This week, corporate issuers are planning to sell another Rb 6.2 bn worth of new paper.
Authors: Dmitry Dmitriev ([email protected])
Mikhail Volkhonsky ([email protected])